V.S. Desai, J.
1. The assessee was carrying on business at Sangli and Madhavnagar. The business consisted of dealing in grain, etc., both on ready and forward business and also as commission agents for constituents wishing to carry on forward business in grain, etc. In the course of its business as commission agents, the assessee carried on transactions on behalf of its constituents in forward business in commodities, which were found to be prohibited under the Spices Forward Contract Prohibition Order, 1944. Out of the constituents of the assessee, who had suffered losses in these transactions, some paid their losses, while the others did not. When the assessee attempted to recover the losses from them, they refused to pay on the ground that the transactions, being in essential commodities, were forbidden by law and the assessee, therefore, had no enforceable claim against them. Although the losses suffered by the constituents were not paid by them to the assessee, the assessee had to pay to the association the amount of the said losses because its works as adatias in forward business involved an indemnity to the association on behalf of the constituents that if the losses were not paid by the constituents, the same would be paid by it. In the assessment for the assessment year 1950-51, corresponding to S. Y. 2005, the assessee claimed the amounts of Rs. 4,733 in respect of the business carried on at Madhavnagar and Rs. 15,797 in respect of the business carried on at Sangli on the basis that these amounts had become bad and irrecoverable debts in the year of account. The claim of the assessee was disallowed by the Income-tax Officer, who took the view that since the debts were not enforceable under the law, they could not be considered to have become bad and, therefore, were not allowable as outgoings for income-tax purposes. This view of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner. In the appeal which the assessee field before the Tribunal, the Tribunal took the view that the assessee's claim for deduction of these amounts could be allowed both under section 10(2)(xi) or on general principles governing the computation of profits under section 10(1). It accordingly allowed the appeal of the assessee and permitted the said deductions. At the instance of the department, it has thereafter drawn up a statement of the case and referred to this court the following question :
'Whether in computing the assessee's commission agency business profits under section 10, sums of Rs. 4,733 and Rs. 15,797 can be allowed as deduction either under section 10(2)(xi), first half, or on general principles governing the computation of profits under section 10(1) ?'
2. Mr. Joshi, learned counsel for the revenue, has argued that in the first place the Tribunal was not entitled to hold that the assessee's claim could be allowed on general principles governing the computation of profits under section 10(1). According to him assessee had never claimed the deduction under section 10(1), his claim being only as for bad debts falling under section 10(2)(xi). The claim of the assessee, therefore, on the case made out by him was either allowable under section 10(2)(xi) or it was not. If it could not be allowed under section 10(2)(xi), no new case could be made out for the assessee allowing the same under section 10(1). According to him, therefore, so far as the latter part of the question is concerned, the answer to the said question must be in the negative. As to the first part of the question, viz., whether the assessee's claim could be allowed as a bad debt falling under section 10(2)(xi), Mr. Joshi's argument is that the claim could not fall under the said head because it is not a debt at all and, therefore, there would be no question of its being bad. Secondly, even assuming that it is a debt, it could not be claimed as a bad debt under section 10(2)(xi) unless the assessee has actually written it off in its accounts in the relevant account year. The assessee has not satisfied the said requirements of section 10(2)(xi) and there is nothing on record to show that the said requirement is satisfied in the present case. The claim, therefore, could not be allowed under section 10(2)(xi) and the answer to the first part of the question must also be in the negative.
3. In our opinion, the argument of Mr. Joshi that the Tribunal was not entitled to consider the claim of the assessee for deduction as coming within section 10(1) is not sustainable. It may be that the assessee in claiming a particular deduction, after having set out the facts and circumstances and the manner in which his claim arose, labelled it wrongly and claimed it as falling under a head under which it does not fall. Such a wrong label attached by the assessee to his claim, however, will not disentitle him from getting the relief under the proper head to which the claim belongs if all the facts necessary for treating the claim under that head have been already stated by the assessee and no further investigation into any fresh facts is found to be necessary to give the assessee the said relief. In the present case, the facts which the assessee put before the Income-tax Officer and the Tribunal were that he had entered into these transactions on behalf of his constituents. The constituents had suffered losses and when the assessee approached them, they refused to pay the losses on the ground that the transactions were forbidden by the Prohibition Order. The assessee had, however, to pay the amounts to the association because the condition of its business as commission agents obliged it to make the payment in respect of the losses suffered by its constituents. It was on these facts that the assessee claimed that the dues which it had not realised from its constituents but which it had to make good to the association should be allowed as a bad debt to it. The Tribunal on these facts found that the dues owed to the assessee by the constituents could be treated as having become bad or irrecoverable debts on the refusal of the constituents to pay the same and, therefore, could be treated as bad debts. The Tribunal also took the view that at any rate the losses which the assessee suffered by being required to make good the unpaid losses of the constituents to the association represented a commercial loss of the assessee during the year in which he made the payment to the association, in the course of its business as adatia. The losses therefore, according to the Tribunal, could be allowed to the assessee as commercial losses under section 10(1) of the Act. In our opinion the view taken by the Tribunal, that on the facts before it the relief sought by the assessee could be granted to it not only under the head under which the assessee had pitched its claim, but even in the alternative under another head, was correct and the Tribunal was entitled to do so. Under rule 12 of the Appellate Tribunal Rules, the Tribunal in deciding the appeal before it, is not merely confined to the ground set forth in the memorandum of appeal or taken by leave of the Tribunal, but may even rest its decision on any other ground provided before basing its decision on the said new ground, it gives the party affected sufficient opportunity to be heard on that ground. It is not disputed that such an opportunity was allowed to the other side before it had decided in favour of the assessee under section 10(1). On the merits of the said ground also in our opinion the decision of the Tribunal is correct and in the circumstances of the case the assessee was entitled to treat the deductions as a revenue loss in computing its profits of the business under section 10(1), inasmuch as for the purpose of doing its business as an adatiya the assessee had to make those payments to the association.
4. As to the claim being allowable as bad debts under section 10(2)(xi), in our view the Tribunal's finding is correct in that respect also. Mr. Joshi's argument that the claims of the assessee against its constituents having arisen out of illegal transactions were not enforceable and, therefore, did not constitute debts and there would consequently be no question of them being bad, has already been dealt with the by us in the case which we have decided just before this case in Commissioner of Income-tax v. Pranlal Kesurdas : 49ITR931(Bom) (Income-tax Reference No. 31 of 1961). In the said case we have expressed the view that the legal unenforceability of the claim did not prevent it from being a bad and irrecoverable debt for the purpose of taxation in the computation of the taxable income of the assessee. The further argument of Mr. Joshi that even though the claim may be treated as a debt, it was not allowable as a bad debt since the assessee had not actually written if off in its accounts cannot be entertained. No such infirmity in the claim was urged by the department before the Tribunal. Mr. Joshi says that the Income-tax Officer having thrown out the assessee's claim on the ground that the claim did not qualify to be a debt at all did not apply his mind further as to whether, if it was regarded as a debt, it satisfied the requirements of a bad debt under section 10(2)(xi). The Income-tax Officer, therefore, had not investigated the fact whether the requirements of section 10(2)(xi) were satisfied by the present debt. The Tribunal, if it did not agree with the view taken by the income-tax Officer that the claim did not qualify for a debt, should have seen further whether the requirements of section 10(2)(xi) were satisfied or not before holding that the claim fell under section 10(1). This the Tribunal has not done. In our opinion the only contention on the basis of which the appellants' claim was denied by the department was that the debt was unenforceable. That, at any rate, appears to be the sole contention urged before the Tribunal and if that contention were to fail, no further contention was sought to be raised by the department that even if it be regarded as a debt there were other grounds for rendering it incapable of being allowed as a bad debt under section 10(2)(xi). In the absence of any such contention having been raised by the department, we cannot say that the Tribunal has erred in treating the debt as a bad debt under section 10(2)(xi). Even in asking for the questions in the present reference, no question has been either suggested or asked for by the department that the Tribunal had erred in holding that the claim fell under section 10(2)(xi) without ascertaining whether the requirements of the said section have been satisfied or not. In these circumstances, we do not think we will be justified in entertaining the argument of Mr. Joshi that the assessee's claim could not be allowed as a bad debt because there is nothing to show that it had actually written off the loss as a bad debt in its books of account.
5. In conclusion, therefore, our answer to the question referred to us is in the affirmative. The Commissioner will pay the costs of the assessee.